Cash flow is the lifeblood of every small business. You can have record sales, a strong brand, and loyal customers, but if the money isn’t coming into your bank account at the right time, your business will quickly run into trouble.
At EBA, we work closely with business owners to ensure their finances aren’t just profitable on paper but healthy in practice. In this blog post, we’ll walk you through simple but powerful ways to improve your cashflow, and build a more resilient business.
- Understand your cash flow cycle
Start by mapping out the movement of cash through your business:
- When do you spend money (e.g. buying stock, paying staff)?
- When do you receive money (e.g. customer payments)?
- Where are the gaps?
A basic cash flow forecast, such as a spreadsheet showing inflows and outflows by month, by week, or even by day (see below) can give you huge clarity. Cashflow forecasting allows you to anticipate problems before they happen, rather than reacting when cash runs tight.
- Strengthen your credit control
One of the fastest ways to improve cash flow is to get paid faster.
- Invoice immediately: don’t delay sending invoices. The sooner the invoice goes out, the sooner the clock starts ticking.
- Set clear payment terms: ideally 7 or 14 days, not 30 (unless you must).
- Automate reminders: set up automatic email reminders before and after due dates. Xero accounting software does this for you.
- Follow up personally: A polite call at 7-10 days overdue often works better than endless emails.
- Offer early payment discounts: incentivise faster payments with small discounts.
- Charge interest on overdue invoices: under UK law, you’re allowed to charge interest. Even if you don’t intend to, mentioning it can encourage quicker payment.
- Credit check new customers before offering terms. Prevention is cheaper than chasing!
- Manage Expenses Wisely
Sometimes, improving cash flow isn’t about getting more money in, but about managing what’s going out.
- Negotiate better terms: ask suppliers for longer payment periods or discounts for early payment.
- Cut unnecessary costs: review subscriptions, software, services, and premises. Are you paying for things you no longer use?
- Match costs to income: align major expenses (like stock or marketing) with predictable income streams.
Every pound you save improves your cash flow instantly.
- Maintain an emergency cash buffer
Cashflow problems often arise unexpectedly: a major customer delays payment, an unexpected tax bill arrives, or costs spike.
Aim to build a cash reserve – even one or two months’ worth of core expenses so that your business isn’t living ‘hand-to-mouth’. Think of it as buying yourself time and options.
- Explore sources of finance (before you need them)
Don’t wait for a cash crisis to explore funding options. Being proactive gives you time to find the best deals.
Common sources of finance include:
- Business overdrafts: flexible but can be expensive long-term.
- Revolving credit facilities: like an overdraft but often cheaper.
- Invoice financing: get advances against outstanding invoices.
- Short-term loans: useful for specific, temporary cash needs.
- Asset finance: spread the cost of equipment purchases.
- Grants: depending on your sector and location, free money may be available!
Make sure you understand the full cost (including fees and interest) before committing to any funding solution. Talk to us at EBA if you want guidance on any of this.
- Keep tax money separate
A hidden cashflow killer for small businesses is forgetting about tax. VAT, PAYE, corporation tax; it’s easy to accidentally spend money that really belongs to HMRC.
Open a separate savings account and move a percentage of your income into it each month. There are business savings accounts out there with banks like Aldermore and Allica Bank that offer good rates of interest.
Treat tax savings like a non-negotiable bill. ‘Future you’ will be very grateful.
- Monitor cashflow daily or weekly, not monthly
Cash flow problems often creep up when you’re not looking.
Review your cash position at least every week; it takes ten minutes if you’re organised. Spot trends early and ask:
- Are customers slowing down payments?
- Are costs creeping up?
- Are we spending before cash comes in?
Weekly visibility gives you control and confidence.
In summary: build cashflow resilience
Improving cash flow isn’t about making one big change: it’s about lots of small habits that keep the money flowing smoothly:
- Invoice promptly and chase debts firmly
- Manage costs and negotiate supplier terms
- Build a buffer and plan your funding options
- Stay on top of your numbers every week
At EBA, we specialise in helping small business owners like you turn cashflow stress into cash flow strength.
So, if you’d like help setting up cash flow forecasts, tightening up your systems, or reviewing finance options, get in touch.
Good cash flow is the difference between surviving and thriving. Let’s make sure you’re in the thriving camp.
